Nonmetro Labor Markets Remain Soft

In 2004, the U.S. economic recovery that began in November 2001 became broad-based, with most domestic sectors exhibiting moderate to strong growth. Construction, especially residential construction, and strong housing markets boosted overall economic growth. In addition, low inflationary expectations, low interest rates, and weak credit demand by businesses produced the lowest mortgage rates since the early 1960s. In nonmetro areas, homeownership rates have reached record highs, continuing to exceed metro rates for most households. The strong housing market raised demand for building materials, contributing to job gains in nonmetro areas where many plants are located.

Nonmetro as well as metro areas, however, continue to struggle with soft labor markets. After more than 2 years of economic expansion, hiring has been slow to recover. The nonmetro unemployment rate rose slightly to 5.8 percent in 2003, from 5.6 percent in 2002. The metro unemployment rate also rose slightly (to 6.0 percent in 2003 from 5.8 percent in 2002). Between 2002 and 2003, average weekly earnings fell 0.5 percent (to $555) in nonmetro areas, and 0.3 percent (to $699) in metro areas, after adjusting for inflation. But 2004 has brought some job growth, with increases in some manufacturing jobs for the first time since 1998.

Between April 2000 and July 2003, nonmetro America added 580,000 people, averaging 0.4 percent population growth per year. This is lower than the current metro growth rate (1.3 percent) and half the nonmetro average during the "rural rebound" of the 1990s. Still, in 2002-03, the annual nonmetro growth rate rose from the previous year, the first such increase since 1994-95, possibly indicating that the nonmetro population downturn may have ended. Rapid population growth in some nonmetro counties, especially those adjacent to metro areas, is due to migration.

But even as some counties gain population, others lose population. Around 600 nonmetro counties lost population during the 1990s, and well over 1,000 nonmetro counties have lost population since 2000. Population loss affects all regions, but is particularly widespread in the Great Plains.